Funding tuition bills--long a tax-efficient way to pass money on
to future generations--just got a boost as an estate-planning
tool.

A recent IRS ruling suggests that taxpayers can not only
contribute to annual tuition costs without incurring estate and
gift taxes, but can also contribute tuition for several years at
once, says Susan C. Frunzi, a partner at law firm Schulte Roth
& Zabel LLP in New York City. "There's always been an
exemption from gift tax and generation-skipping tax for tuition
paid directly to a school," says Frunzi. "But this ruling
clarifies that you can prepay tuition for multiple years and still
qualify for the exemption."

With tuition bills skyrocketing, four years of tuition can
easily add up to $200,000 or more--making the prepayment option a
great way for relatives of private school- and college-bound kids
to save significantly in estate taxes. The method is particularly
apropos for wealthy taxpayers who want to fund a student's
tuition but fear that they won't live long enough to pay the
bills as they become due.

But prepayment comes with a caveat. "These payments are
nonrefundable, so if the student drops out of school or transfers,
you won't get your money back," says Frunzi, who notes
that the school's policy on prepayment should be carefully
scrutinized. "For example, you'll want to know whether you
lock in the tuition rate or are responsible for tuition increases,
and [whether] the taxpayer gets credit for interest earned on the
prepaid money. Ideally, a taxpayer's lawyer should look over
the terms of the agreement."

Board Games

U.S. director compensation continues to soar annually--2005
figures were up a hefty 14 percent from 2004 and 64 percent from
2000, according to executive search firm Spencer Stuart's 2005
Board Index. Those double-digit increases don't bode well for
early stage companies seeking director candidates, says Phil
Johnston, managing director of the company's San Francisco
office. "Essentially, [small and large companies] are looking
at the same pool of candidates," he explains. "So when
people see compensation rising at large, established companies,
they expect to be reasonably paid to serve on the boards of
smaller, growing ones, too."

The turbulent IPO market of recent years has also played a role
in raising cash demands, spurring potential directors to require a
portion of their compensation in cash instead of just equity.
"A few years ago, they wanted all the equity they could
get," reports Johns-ton, who points out that serving on the
board of a young company can be demanding. "But since then,
many people have served for years on boards that still haven't
had a liquid-ity event. Now many great directors won't go for
equity-only board compensation. That's the biggest change
we've seen post-2000."

But Johnston is quick to add that early stage and pre-IPO
companies seeking to fill board seats should not despair. The IPO
market is beginning to swell, which may lead back to equity
orientation. "And there are always directors who gravitate
toward the hands-on excitement of an earlier-stage company,"
he says. "They like to be on the cutting edge; they don't
care as much about the compensation."

Financial Frontier

Thanks to NASA, starry-eyed technology entrepreneurs will soon
have a new potential funding source. Tentatively dubbed Red Planet
Capital, the initiative will be modeled after In-Q-Tel, the private
nonprofit funded by the CIA that works with entrepreneurs,
established companies, universities, researchers and VCs to develop
technologies that serve U.S. interests.

"The goal for NASA is to be able to support emerging,
innovative technologies that will help us with our space missions,
such as setting up a permanent moon base and embarking on journeys
to places like Mars," explains NASA's Melissa Mathews. She
says NASA has earmarked $11 million for the initiative in 2006 and
will eventually up that amount to $20 million per year. "The
kinds of technologies we're interested in include water
recycling, communications and biomedical support, among
others."

Like In-Q-Tel--which reportedly couples every $1 it invests with
$3 of private capital--Red Planet Capital will leverage its own
funding capital by investing in syndication with existing
private-sector corporate and financial venture funds.

"Our objective is to support technologies to meet our
future mission needs, achieve sustained positive financial returns
and better position these technologies for future commercial
use," explains Mathews. "The In-Q-Tel model illustrates
this is possible for a relatively small investment."

While the fund is currently still under development, NASA plans
to begin making investments by the end of 2006, according to
Mathews: "We'd like to get the fund operational by summer
and have investments in place before the end of the fiscal
year."